Online boom sparks credit card crimes

THE online shopping boom has spawned a surge in credit card crime, with more than a million cases of card fraud in Australia last year and total losses blowing out to a record $278 million — almost double the level of two years earlier.

The ballooning losses have prompted a scramble among card issuers, including Visa and MasterCard, and banks to try to keep ahead of the criminals, as more consumers put themselves at risk with online and offshore transactions.

One in 15 adults were hit with credit card fraud over the past year. Photo: Karl Hilzinger

A large proportion of the rise in losses is due to online retailers having their systems hacked and credit card details stolen. There has also been a big increase in home computers being compromised for fraud.

"We've got more transactions and shopping occurring online than has traditionally occurred so that's driving these losses," said Nick Scott, head of cyber-security at National Australia Bank. "Customers are becoming more comfortable with the concept of shopping online and with that comes the potential for having those credentials compromised," he told The Age.

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But despite the increase in losses, banks insist there are no plans to water down their commitment to repay fraud victims.

“When fraud does occur, customers can be assured that they are not liable for losses from unauthorised transactions where it is clear that the user has not contributed to the loss,” Australian Bankers Association chief Steven Munchenberg said.

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New figures from industry body the Australian Payments Clearing Association show a total of $300.8 million was lost on credit cards, debit cards and cheques over 2011.

The association found that:

■There were about 1.1 million individual cases of fraud on credit cards and debit cards.

■About 71 per cent of losses were on transactions in which the cardholder and retailer did not meet face to face, such as online or on the phone.

■The average value of each fraudulent transaction was $250.

■The total losses translate to 96¢ in fraud for every $1000 spent on cards, up from 67.2¢ in 2010.

■With the plunge in cheque use came a big fall in cheque fraud. Just 883 suspect cheques were written, to a value of $8.8 million, down from $18.1 million in 2010.

While online card fraud is booming, efforts by banks to stamp out card "skimming" — in which people's details are copied and stolen at eftpos terminals and ATMs — have generated some success. The incidence of skimming fraud fell 18 per cent in 2011 to $13.7 million. Much of the fall was attributed to new chip technology on debit cards.

Banks invest hundreds of millions of dollars in fraud prevention, and most operate sophisticated systems that track transactions and often flag suspicious behaviour. For example, a credit card used in Hong Kong within a few hours of being used in a restaurant in Australia would set off alarm bells.

One new area of risk has been created with the trend for companies such as telcos to hold credit card data for long periods for automatic payments.

NAB's Nick Scott said banks always tried to stay ahead of what criminals do. "At the end of the day our customers don't set out to be defrauded. We don't want to move them away from this online channel. Online is the next major space in trade."

Mr Munchenberg said that as technology and consumer payment patterns changed, "so too does criminal behaviour".

Matt Levey, of the consumer watchdog Choice, said research was the key to avoiding credit card fraud online.

"Safe online shopping means doing your homework. Start with recommendations from family and friends, and always try to find out as much as possible about the company before you hand over any credit card details," Mr Levey said.

He recommended shopping only on websites that use secure payment facilities indicated by a locked padlock in the right-hand corner. He also advised against responding to unsolicited contact, and to"be suspicious of anyone who is pressuring you to buy something right away".